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Should The Finance Minister Let The Industry Set Their Own Rates?

Posted on April 11, 2013 by Michael Wilcox

Recently the Finance Minister of Canada, Jim Flaherty, advised two lenders, BMO and Manulife, to take away the low rates they were offering to the public. Although the minister has good intentions for the economy and the Canadian people this move has been criticized by numerous people, companies as well as a political party, the NDP.

The Bank of Canada sets policy for general lending rates through the movement of it’s own key lending rate and this has always been the case. But harassing individual companies to take away 10-20 basis points in rate discounts may be stepping past what his mandate is as the Finance Minister. I guess the question is why shouldn’t a consumer get the best deal possible if a company decides to offer this. It’s obviously within their means and is a viable business decision so why should it not be passed onto consumers and borrowers.

With that being said rates are, as we all know historically low. Ask your mortgage advisor to do a stress test for you when applying for a mortgage. This way you’ll know what your payment could go up to down the road should rates rise. There’s no indication of them rising anytime soon though. And even when they do, right now, the forecast is for them to move up very slowly.

As always, if you have any questions please feel free to call or email me directly.